Study: Disparity In Bank Use By Whites, Minorities

May 20, 1993|By Sharon Stangenes.

African-Americans and Latinos are less likely than whites to use many banking services and far more likely than whites to conduct financial transactions through currency exchanges, according to a study on consumer access to credit in the Chicago area.

The report by the Metro Chicago Information Center, an independent research organization, examines use of checking and savings accounts, currency exchanges, automatic teller machines, credit cards and other financial services by geographic area, income and racial and ethnic group.

The 125-page report, "Community Financial Needs in the Chicago Area," was drawn from interviews with more than 3,000 households. The center collects data about the Chicago area for use by social-service agencies, government institutions and corporations. It is financed by the John D. and Catherine T. MacArthur Foundation, the Robert R. McCormick Tribune Foundation, the Chicago Community Trust, the United Way of Chicago and the Joyce Foundation.

While the statistics are described as a "first cut" and will be analyzed further, they indicate about 44 percent of Hispanic and 54 percent of African-American households have checking accounts, while 93 percent of white households have them.

To pay bills, 38 percent of Latinos use currency exchanges, while 23 percent of black households and just 2 percent of whites do so.

Those results, and others from the study, are sure to be examined for clues by community groups and financial institutions seeking information about the vexing issues of who gets credit and how to correct inequities in access to financial services.

While many of the figures might have been expected, Dan Stolze, director of marketing for the information center, said he was surprised by the "high currency exchange use as an alternative to a bank by the Latino population."

Malcolm Bush, president of the Woodstock Institute and a member of the advisory committee that helped the information center with questions for the survey, said, "I think we do find very strong differences between city and suburbs in use of currency exchanges."

The survey found that a total of 9 percent of respondents in the metropolitan area use currency exchanges to pay bills. Twenty percent of Chicago residents do so, but only 3 percent of suburbanites, partly a reflection of the fact that there are fewer currency exchanges in the suburbs.

Thirty percent of those who use currency exchanges to pay bills have household incomes of less than $20,000, Bush noted.

As banks have closed branches in low- and moderate-income neighborhoods, currency exchanges, which charge higher fees than many banks and offer a more limited number of services, effectively have become monopolies, he said.

"It is just one more example that lower- and moderate-income areas are comparatively more expensive to live in," he said.

"This study is very important because it is the first level of empirical data as it relates to credit other than mortgages.

"Up to this point, community groups have accused banks of deserting neighborhoods and leaving them without credit. Banks answer (that) credit is available to anyone who qualifies. The only facts were that there were fewer bank branches in some neighborhoods."

Facts available in the report, for example, are that 84 percent of those who live on the North Side of Chicago have checking accounts, while only 33 percent of those on the West Side, which has fewer banks, have them.

In the metropolitan area, 81 percent of households have checking accounts, 75 percent use a credit card and 48 percent are saving through an individual retirement account or Keogh plan.

Forty-four percent of households have a mortgage and 15 percent have a home-equity loan, while 11 percent have an outstanding student loan and 1 percent have an outstanding medical loan.

Among other statistics in the study:

- While 75 percent of respondents have a savings account, 83 percent of whites have such an account, compared with the 57 percent of African-Americans and 50 percent of Hispanics who do. Among those without a savings acount, 60 percent said no bank, savings and loan or credit union is within walking distance of home.

- About half, 46 percent, of respondents use automatic teller machines, or ATMs. That figure is slightly higher, 50 percent, in the suburbs. The use of ATMs increases with income; only 20 percent of households with income of less than $20,000 use them, while 63 percent of households with income of more than $40,000 do so.

- Overall, 75 percent of respondents have a credit card; not surprisingly, there is a higher percentage of people with credit cards in higher-income groups. Credit cards are held by a larger portion of suburban residents, 85 percent, than city dwellers, 59 percent.

- Finally, errors in credit-report accuracy are the same across geographical, income, racial and ethnic groups. About 40 percent of those surveyed who have seen a credit report said they had found errors in it.